GBP
The last Bank of England rate meeting was always going to be about one thing; would the bank walk towards or away from negative interest rates? Since the start of the year Governor Bailey's comments had been interpreted as walking back market expectation from the Bank using negative interest rates. The fact that the UK managed to avoid a 'no-deal' Brexit would have been a big sigh of relief to Governor Bailey. Perhaps it was this that helped him mentally walk back from the use of negative interest rates. It was certainly referred to in the MPC (Monetary Policy Committee) minutes as a point to note.
The last meeting
Last week the Bank of England further cemented their aversion to using negative interest rates. The UK 10 year bond yield chart shot higher as bond traders started to price out any remaining expectations of the Bank of England using negative rates.
Although the Bank of England announced preparations for PRA regulated firms to implement a negative bank rate the bank made it clear this was 'not a signal about the future path of monetary policy'. This was about structure rather than policy. The GBP was supported out of the meeting as the MPC had a 'materially stronger than expected' view on growth. You can read that sentence here in the Bank's report. Bond purchases were unchanged, interest rates kept at 0.1%, and the bank remains uncertain with regard to the true UK employment picture. Any hikes in interest rates are only set to come when there is 'clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably'.
